Article Archives - Page 351 of 630 - Money Morning - Only the News You Can Profit From
- New Obama Job Creation Plan Coming Next Month
Emerging-Market Stocks Hit Historic Lows: Don't Miss Your Chance to Load Up
Thanks to the wild market swings of the past month, emerging-market stocks are trading at historic lows. That means investors have a rare opportunity to load up on stocks at valuations they wouldn't see under normal circumstances.
If we were talking about a sell-off that was based on fundamentals, that might be a warning sign. But what we've seen instead is the irrational dumping of companies that actually are poised to see their profits grow.
Take a look.
The stock-market sell-off that's pushed the Dow Jones Industrial Average down 9% in the past month has rubbed off on emerging-market stocks. The MSCI Emerging Markets Index, which tracks market performance in developing economies, has slipped 12% this month – its worst slide in three years. After falling as low as 990, it's now trading around 1,010, 28% below its 20-year average.
This puts emerging-market stocks near record-low valuations, and with their high-growth outlook it's time for investors to scoop them up at bargain prices.
"We've been pecking away at things as they decline," billionaire investor Wilbur Ross, chief executive officer of WL Ross & Co., told Bloomberg Television. There's "plenty that's attractive in the emerging markets. Buying stocks at today's prices over a couple of years' time period will prove to be a uniquely rewarding experience."
Current emerging-market valuations are at their lowest level since March 2009, but companies are worth much more than share prices reflect. The latest prices imply these companies will lose about 20% of earnings over the next year, according to Morgan Stanley (NYSE: MS), when in reality they're poised for growth.
It's Time to Bail on Bank Stocks
There was a time when bank stocks actually looked like good investments. And many, having racked up big gains over the past two years, proved to be just that.
But sadly, U.S. banks no longer offer the value and profit-making potential they did immediately following the financial collapse. In fact, they're actually heading for what could be a catastrophic decline.
Let me explain.
On February 18, 2009, I wrote a piece that said bank stocks should not be written off.
I observed at the time that the best U.S. banks had huge business strengths that were not fully undermined by the financial crisis. So I advised investors buy shares of the best among them.
As it turns out, that recommendation may have been too timid.
That is, most bank stocks – including some of the weakest and least investment-worthy – have surged since my article's publication.
Even following a lukewarm second quarter and last week's market meltdown, the top six banks – Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (NYSE: GS), and Morgan Stanley (NYSE: MS) – are in a relatively impressive position.
Take a look for yourself:
- Goldman Sachs stock is up about 22%.
- Bank of America is up 30%.
- JPMorgan is up about 49%.
- And Wells Fargo is up 55%.
Only Citigroup, down about 13%, and Morgan Stanley, down 20%, have seen their stock plunge.
But in light of this remarkable run up, and the disastrous pitfalls that lie ahead, now is the time to bail on bank stocks.
Margins are narrowing, government regulation is increasing, and the outlook for big deals is drying up.
In other words: The risks related to bank stocks are as present as they ever were – just the profitability is missing.
The Google-Motorola Deal: Winners and Losers
Google partners could well become rivals, while the other major players in the mobile computing arena, such as Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT) and Research in Motion (Nasdaq: RIMM) all will be affected – some negatively, but some positively.
The new partnership also could inspire other merger and acquisition activity in the sector, between large, cash-rich companies and small, struggling ones.
Let's take a look at how the Google-Motorola deal, which was announced on Monday, will alter the mobile computing landscape, company by company:
Google: A Mixed Bag
Primarily, Google bought Motorola to acquire its vast patent portfolio to better defend its mobile operating system, Android, from a rising number of patent lawsuits.
"Motorola has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple and other companies," Google CEO Larry Page said in Monday's conference call.
Although most of the lawsuits have been aimed at handset makers such as HTC Corp. (OTC: HTCXF), Samsung Electronics LTD (PINK: SSNLF), and Motorola, the common thread was Android. Microsoft focused on collecting licensing fees for each handset, while Apple's strategy was to halt the sale of devices competing with its own iPhone and iPad products.
The typical defense to patent lawsuits is another patent lawsuit, but you need to possess a broad portfolio to do that. Google, which had a mere 700 patents before, will add Motorola's 24,000 patents to its arsenal.
- WMT/HD Positive Earnings… Real sign of life for consumer spending or not?
Why It's Time to Buy Google Inc. (Nasdaq: GOOG)
By announcing its plans to buy Motorola Mobility Holdings Inc. (NYSE: MMI) yesterday (Monday), Google Inc. (Nasdaq: GOOG) is forcing me to make a statement that I never thought I would make: It's time to buy Google.
The $12.5 billion deal will see Google acquire the phone-making half of the Motorola Inc. spin-off that took effect in January. Google is paying $40 a share in cash – about a 63% premium to Motorola Mobility's closing price on Friday. The deal – which Google says will help it "supercharge" its Android smartphone business – will close late this year or early in 2012.
I used to look at Google as the next Microsoft Corp. (Nasdaq: MSFT). But Google has achieved a status that Microsoft shot for – and missed: It's become an online leader and a factor in the everyday life of consumers. Google also has massive growth potential available, and hasn't quit trying to grow.
And that's a good reason – perhaps the best reason – to own Google today and into the future.
Google's purchase of Motorola Mobility will showcase this potential. It positions Google to pair Motorola smartphones with its Android software and compete against iPhone-maker Apple Inc. (Nasdaq: AAPL).
However, Google's new purchase does a lot more than dangle a bigger slice of smartphone market share – and this reason is why I finally decided Google is a "Buy." (**).
Motorola Mobility: All About the Patents
The game-changing benefit for Google in the Motorola Mobility deal is the intellectual property Google is picking up. We are talking about 17,000 patents in this purchase.
A stronger patent portfolio allows Google to reduce royalty costs by using cross-licensing agreements with handset makers. And it protects the Android smartphone market from getting slammed with patent fees (and lawsuits) as sales continue to climb.
The number of Android-software-powered phones jumped 300% last quarter.
Motorola Mobility's patent portfolio will enable Google to move to hardware design for its Android phones. That will give Google both the phone operating system and the intellectual property to act as a gatekeeper in the mobile space.
How to Find Energy Company Value in a Schizophrenic Market
The market remained highly volatile as we wound up last week. But the reason for that chaos seemed to be shifting from U.S. debt concerns back to the condition of credit in Europe.
Debt contagion in Western Europe was the primary reason for last week's market dives. The focus is now the condition of European banks – a disquieting shift when you remember the cause of the market slide beginning in late 2008…
Then, the credit crunch was enveloping economies worldwide. Banks could not get overnight funds from other banks, so access to business loans dried up, and the prospects of deep recession (or worse) led the worries in the United States and Europe.
At least the banking system is much better off this time around (even though financial institutions continue to withhold trillions of dollars from the flow of credit).
Now comes word that French banks may have the same endemic problems already identified in their counterparts elsewhere in Western Europe. If the trouble is real – and last week's actions by Asian banks do render credence to it – that will guarantee further turbulence in trading markets.
So much for Standard & Poor's example of France as the model for setting the U.S. debt house in order.
Actually, why anybody still lends any credence to these fiscal alchemists on sovereign debt matters is beyond me. The sub-prime collateral mortgage obligation catastrophe indicates they are not so hot on the private issuance side, either. Ultimately, whether the debt bubble is buried in commercial bank ledgers or in the public budget does not change the issue. It will have the same net effect when it bursts – disaster.
We should demand some accountability for rating agencies to understand what they are reviewing and forecasting. Otherwise, I would be about as successful with a Ouija Board.
One other matter before I stop kicking this dead horse…
If you already receive Kent's newsletter, there is no need to sign up (you've already received this report as part of your existing subscription). But if you aren't a subscriber, take a moment to sign up below to receive this article — and to receive other weekly insights from one of the best-connected energy-sector gurus you'll ever find. It's free.
A U.S. Double-Dip Recession? Why George Soros is Wrong
In an interview with Der Spiegel, investing legend George Soros says the Standard & Poor's downgrade of the U.S. credit rating means that it's more likely than ever there will be a U.S. double-dip recession.
But here's the thing.
As much as we respect Soros as an investor, barring an outside shock, a U.S. double-dip recession isn't in the cards. Not for now, at least.
And we can prove it.
To find out how, you need to read Martin Hutchinson's analysis in today's (Tuesday's) issue of Private Briefing.
If you're a charter subscriber, just log in. If you're not, please click here.
News and Related Story Links:
U.S. Gold Standard Debate Heats Up on 40th Anniversary of "Nixon Shock'
When U.S. President Richard M. Nixon announced on Aug.15, 1971 that the United States would no longer adhere to the gold standard – the mechanism that fixed the U.S. dollar's value to that of gold − the move was cheered.
The Dow Jones Industrial Average jumped nearly 4%, and The New York Times gushed, "We unhesitatingly applaud the boldness with which the President has moved."
But now, 40 years later, there is a new gold-standard debate and the decision is being examined anew.
Proponents say the move had to be made, since the gold standard needlessly restricted the U.S. Federal Reserve's ability to manage the money supply, particularly during times of economic distress.
To critics, however, the once-heralded decision has lost much of its former luster. They say that abandoning the gold standard has served only to devalue the dollar, making everything else comparatively more expensive.
Here at Money Morning we've talked about the implications of the gold standard debate, as well as how our readers can capitalize on gold as a safe-haven investment – especially given the "yellow metal's" ever-increasing value versus the dollar.
Widening U.S. Trade Deficit Adds to Fears of Global Economic Slowdown
The widening U.S. trade deficit surprised analysts last week by reaching a level not seen since October 2008, while the decline in exports added to growing evidence of a global economic slowdown.
The U.S. Commerce Department announced last Thursday that the trade gap grew 4.4%, to $53.1 billion from $50.8 billion in May. Economists had expected it to shrink to $48 billion.
Although both exports and imports declined, economists viewed the drop in exports as another sign of trouble for the global economy, which in turn will exert more stress on the struggling U.S. recovery.
The bad news means the government will need to revise second-quarter gross-domestic product (GDP) downward by about half.
"It appears that one of the last fully functioning engines of growth may be faltering," economist Gregory Daco at IHS Global Insight wrote in a note to clients.